The globalization process has been going fast even before the pandemic but right now it’s a must for any SME to know how to make an international money transfer for cheap. That’s because the COVID-19 crisis hit all industries hard. Therefore, now doing business outside of the UK has become paramount to survival. Fortunately, even small businesses can now easily deal with customers, suppliers, and partners from abroad as they have other options than expensive bank wire transfers. Using the services of UK fintech startups is the best way to make an international money transfer in 2021. These companies are extremely versatile and can help you to not only cut the cost of overseas payments. They also offer currency guidance that will reduce the risks inherent to foreign exchange (FX or forex) volatility.
How Much Does It Cost to Make an International Money Transfer from the UK?
Going global should be good for the majority of businesses., However, many SMEs had no chance to do this because profit margins for international dealings might not be very big. But the cost of making an international money transfer is high, so the company would turn very little profit.
This situation existed because businesses mostly choose their regular bank to make an international money transfer. Unfortunately, this means that you’ll be charged the bank’s fee for the transaction and also pay the high foreign currency exchange rate. Note that even receiving money from overseas customers will be tough because banks charge a separate fee for incoming international transfers.
International money transfer rates through banks vary depending on the bank and currencies involved. However, in some cases, the total cost of a transaction can climb over 7% of the transfer volume. Remember that the recipient’s or sender’s bank abroad will also charge a fee. Leading UK banks will charge about £6 as a fee for incoming payments from abroad. The fee for an outgoing international money transfer differs much more. There is Barclays that charges £40, Santander with £25, and Lloyds with £9.5. The latter doesn’t seem so bad, but when dealing with banks you must always keep in mind the FX rate.
The main reason why bank transfers are so expensive is high foreign currency exchange rates. Banks add a hefty markup to the interbank exchange rate, which is how they make their money off these transactions. This means that you are losing money without realizing it even if the bank fee is very small.
A solution to this issue was offered by fintech startups that specialize in making international money transfer services affordable.
COVID-19 Impact on UK Businesses: Why International Money Transfer Services Matter More Than Ever
The COVID-19 pandemic impacted the world greatly. In fact, even foremost experts on the economy cannot predict exactly how the world is going to recover. However, one thing is obvious, direct retail might never recover at all. That’s because the pandemic caused an unprecedented growth of eCommerce. It also helped along the globalization process in some ways.
The most important changes for SMEs were the people’s desire to shop internationally and a desperate need to access cheaper resources. That’s why any small business that wants to succeed today must use international money transfer services regularly. You might need them in order to accept payments from customers overseas. Or you might need to pay suppliers abroad. Also, building a remote team of freelancers can help reduce some essential business expenses. Again, the international money transfer service is necessary to pay foreign remote employees.
Smart business owners are also considering ways to invest abroad, which will also require making regular cross-border transfers. In this case, in particular, you’ll need to worry not only about transfer costs but also forex volatility. International money transfer rates are always in flux because the FX currency exchange market is volatile on a good day. Currently, there is a great risk in committing to regular international payments without the security of hedging. However, banks only offer access to good hedging tools to large corporate and VIP clients.
Considering this situation, it’s not a surprise that the demand for alternative international money transfer services has skyrocketed. Fortunately, today there are many fintech startups in the UK that can offer SMEs a way to save 3% and more of the transfer volume on every transaction. Moreover, they provide currency guidance and additional services that can help you save even more money in the long run.
How to Get the Best International Money Transfer Rates
The biggest advantage of using the services of international money transfer companies instead of banks is that you get to save money. An average transaction through one of the leading companies will cost 1-3% of the transfer volume.
Bear in mind that these companies work like currency wholesalers. Therefore, they are able to offer lower international money transfer rates when they have a higher turnover. This is extremely useful for businesses because often large transfers are cheaper. In fact, some companies might even offer you to exchange the currency at the mid-market rate, which is the lowest.
Some companies that specialize in working with SMEs will charge no fees at all for some transactions. Also, even when the company charges some fees, they are usually lower than a bank’s.
Benefits of Using International Money Transfer Companies
International money transfer startups also offer many other benefits. Handy and versatile apps are one of them. With these solutions, you can easily manage your currency conversions and transfers from your smartphone or computer.
These apps also have some great features. For example, as a business owner you should always track currency values. However, the majority of public sources will tell you only bank exchange rates. International money transfer rates from FX companies are always changing and will be affected by many factors. The size of your transfer and currency pair matter most. However, the system of rate determination used by FX currency brokers is very complex and sometimes even the day of the week will affect it.
Therefore, simply checking the international money transfer rates offered by a couple of companies while drinking coffee in the morning won’t help you much. If you want to really be sure that the rate you get is the best, you’ll need to set up alerts that will notify you of important changes. Apps from leading international money transfer companies allow you to set up these and other alerts easily.
These companies also offer SMEs help in the form of guidance and currency hedging tools. Your dedicated dealer will be able to help you use the tools available to secure the best rates in different situations.
Hedging tools reduce the risk by offering you some security in situations where international money transfer rates change rapidly. They are extremely useful if you are doing business with developing countries, where FX rates are extremely volatile. They are also helpful for big deals, like purchasing real estate.
Top 5 UK International Money Transfer Companies in 2021
There are many options to choose from when you want to make an international money transfer from the UK. However, not all of them are equally good and reliable. As this industry is new and not well-regulated, you should be thorough when comparing offers from different companies. It’s definitely the safest route to pick from among the recognized industry leaders. These companies have already proven to be trustworthy. They are also transparent about their international money transfer rates and fees and are regulated by the FCA.
Leading UK international money transfer companies today are:
Currencies Direct has 22 offices worldwide and supports 39 currencies. This company has an extremely wide global reach and it’s even available in some of the US states. Aside from currency exchange and money transfer services, Currencies Direct also offers expertise in international real estate investing. This will be useful for businesses that plan to expand or simply invest overseas. The company’s yearly turnover is £7.5 billion and it never charges any transfer fees.
TorFX supports 40 currencies and offers some of the most extensive currency hedging options. The company also allows you to open a Barclays Bank account through it. It employs experienced traders that offer guidance to customers. The company is also known for its innovative solutions that make it very easy for businesses to use.
Moneycorp is one of the oldest and most reliable international money transfer providers. The company allows you to make transactions in 120 currencies and has dozens of offices worldwide. It also offers diverse hedging opportunities and tailored currency guidance for every customer. Moneycorp’s annual turnover is nearly £40 billion. It also has a high credit rating, which is essential for SMEs.
Currency Solutions is one of the newer international money transfer providers. However, it’s trustworthy, according to its 4.9 TrustPilot rating. The company supports 34 currencies and specializes in working with small businesses specifically. It’s not available in the USA but has offices in the UK and EU. The company’s web solution is very easy to use and understand and the signup process is simple. But it doesn’t have a mobile app as of yet.
Halo Financial has a decade of experience and offers great international money transfer rates. The company is small but extremely efficient and has a wide service offering for SMEs. It supports 30 currencies and has multiple positive client reviews.